Sterling Bancorp announces results for the second quarter

Key Performance Highlights for the Three Months ended June 30, 2019 vs. June 30, 2018

($ in thousands except per share amounts)	GAAP / As Reported								Non-GAAP / As Adjusted¹
	6/30/2018			6/30/2019			Change % / bps		6/30/2018			6/30/2019			Change % / bps
Total revenue²	$	284,084		$	258,897		(8.9	)%	$	276,806		$	263,259		(4.9	)%
Net income available to common	112,245			94,473			(15.8	)	112,868			105,124			(6.9	)
Diluted EPS available to common	0.50			0.46			(8.0	)	0.50			0.51			2.0
Net interest margin³	3.56		%	3.53		%	(3	)	3.62		%	3.58		%	(4	)
Return on average tangible common equity	18.68			15.13			(355	)	18.79			16.83			(196	)
Return on average tangible assets	1.54			1.36			(18	)	1.55			1.51			(4	)
Operating efficiency ratio⁴	44.0			49.0			500		38.3			40.9			260

Net income available to common stockholders of $94.5 million (as reported) and $105.1 million (as adjusted).
Total commercial loans of $17.6 billion at June 30, 2019; growth of 12.0% over June 30, 2018.
Operating efficiency ratio of 49.0% (as reported) and 40.9% (as adjusted).
Repurchased 4,502,053 common shares in the second quarter of 2019.
Tangible book value per common share¹ of $12.40; growth of 13.6% over June 30, 2018.

Key Performance Highlights for the Three Months ended June 30, 2019 vs. March 31, 2019

($ in thousands except per share amounts)	GAAP / As Reported								Non-GAAP / As Adjusted¹
	3/31/2019			6/30/2019			Change % / bps		3/31/2019			6/30/2019			Change % / bps
Total revenue²	$	255,103		$	258,897		1.5	%	$	263,923		$	263,259		(0.3	)%
Net income available to common	99,448			94,473			(5.0	)	105,902			105,124			(0.7	)
Diluted EPS available to common	0.47			0.46			(2.1	)	0.50			0.51			2.0
Net interest margin³	3.48		%	3.53		%	5		3.54		%	3.58		%	4
Return on average tangible common equity	16.00			15.13			(87	)	17.04			16.83			(21	)
Return on average tangible assets	1.39			1.36			(3	)	1.48			1.51			3
Operating efficiency ratio⁴	45.1			49.0			390		40.5			40.9			40

Growth in commercial loans of $495.8 million over linked quarter; 11.6% annualized growth rate.
Total deposits were $20.9 billion with a cost of 0.91%. Municipal deposit balances decreased by $327.7 million due to seasonal outflows.
Total cost of deposits increased by three basis points; total cost of funding liabilities decreased by one basis point.
As adjusted net interest margin increased four basis points to 3.58%. Excluding accretion income on acquired loans, net interest margin for the three months ended June 30, 2019 was 3.22%.
Recorded pre-tax charge of $14.4 million related to ongoing financial center consolidation strategy. Consolidated two financial centers in the second quarter of 2019. An additional 10 financial centers and three back-office locations anticipated to be consolidated in 2019.

Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
Net interest margin is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.
Operating efficiency ratio is a non-GAAP measure. See page 21 for an explanation of the operating efficiency ratio.

MONTEBELLO, N.Y., July 24, 2019 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE: STL) (the “Company”), the parent company of Sterling National Bank (the “Bank”), today announced results for the three and six months ended June 30, 2019. Net income available to common stockholders for the quarter ended June 30, 2019 was $94.5 million, or $0.46 per diluted share, compared to net income available to common stockholders of $99.4 million, or $0.47 per diluted share, for the linked quarter ended March 31, 2019, and net income available to common stockholders of $112.2 million, or $0.50 per diluted share, for the three months ended June 30, 2018.

Net income available to common stockholders for the six months ended June 30, 2019 was $193.9 million, or $0.92 per diluted share, compared to net income available to common stockholders of $209.1 million, or $0.93 per diluted share, for the six months ended June 30, 2018.

President’s Comments
Jack Kopnisky, President and Chief Executive Officer, commented: “We continued executing our strategy in the second quarter, focusing on growing our commercial businesses, transitioning our balance sheet and driving operational efficiency. In the second quarter of 2019, our adjusted net income available to common stockholders was $105.1 million and our adjusted diluted earnings per share available to common stockholders was $0.51. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.51% and adjusted return on average tangible common equity of 16.83%.

“Our commercial businesses have continued to demonstrate strong performance. We grew spot commercial loan balances by $888.3 million since December 31, 2018, which was offset by substantial run-off of residential mortgage loans of $297.6 million. At June 30, 2019, our loan portfolio consisted of 86.2% in total commercial loans, in-line with our longer-term target of commercial loans representing at least 85.0% of our total portfolio. We will remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

“Our average total deposit balances have increased by $380.2 million since the second quarter of 2018. Total deposits were $20.9 billion and the cost of total deposits was 0.91% in the second quarter of 2019. We have seen an improvement in market conditions and competitive dynamics in our deposit markets, demonstrated by the increase of three basis points in total cost of deposits relative to the linked quarter. This is substantially lower than the pace of quarterly deposit rate increases we have experienced since the completion of the Astoria Merger in Q4 2017.

“Although we experienced some pressure on earning asset and loan origination yields, our net interest margin excluding accretion income on acquired loans increased six basis points to 3.22% in the second quarter of 2019. We anticipate that our loan portfolio transition, lower FHLB costs and borrowing balances, and improving deposit market competitive dynamics will allow us to maintain and potentially increase our current level of tax equivalent net interest margin excluding accretion income on acquired loans in 2019.

“We continue to focus on controlling operating expenses and driving operational efficiency. During the second quarter of 2019, we consolidated two financial centers, bringing our total to nine financial centers consolidated year to date. We recorded a pre-tax charge of $14.4 million related to our ongoing financial center consolidation strategy and anticipate consolidating an additional 10 financial center locations and three back-office locations through the rest of the year. We anticipate our total financial centers will be below 85 in the next 12 to 18 months. In the second quarter of 2019, our annualized adjusted operating expenses were $432.2 million and our adjusted operating efficiency ratio was 40.9%.

“Our tangible common equity ratio was 8.94% and our estimated Tier 1 Leverage ratio was 9.57% at June 30, 2019. Our tangible book value per common share was $12.40, which represented an increase of 13.6% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders. In the second quarter of 2019, we repurchased 4,502,053 common shares. There are 8,380,581 shares remaining for repurchase at June 30, 2019 under our current authorized repurchase program. We anticipate we will complete our program by the end of 2019.

“We have created a Company with significant operating flexibility and are confident that our business mix, growth strategy and strong capital position will allow us to continue generating superior returns and earnings per share growth. We would like to thank our clients, colleagues and shareholders for your support and look forward to working with all of our partners as we continue to build a great company.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on August 19, 2019 to holders of record as of August 5, 2019.”

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company’s GAAP net income available to common stockholders of $94.5 million, or $0.46 per diluted share, for the second quarter of 2019, included the following items:

a pre-tax loss of $528 thousand on the sale of available for sale securities;
a pre-tax charge of $14.4 million related to the consolidation of financial centers and other back-office real estate locations; and
the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $200 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $105.1 million, or $0.51 per diluted share, for the three months ended June 30, 2019.

Non-GAAP financial measures include references to the terms “adjusted” or “excluding”. See the reconciliation of the Company’s non-GAAP financial measures beginning on page 18.

Net Interest Income and Margin

($ in thousands)	For the three months ended									Change % / bps
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Interest and dividend income	$	304,906		$	309,400		$	302,457		(0.8	%)	(2.2	)%
Interest expense	58,690			73,894			70,618			20.3		(4.4	)
Net interest income	$	246,216		$	235,506		$	231,839		(5.8	)	(1.6	)

Accretion income on acquired loans	$	28,010		$	25,580		$	23,745		(15.2	)%	(7.2	)%
Yield on loans	5.01		%	5.17		%	5.20		%	19		3
Tax equivalent yield on investment securities	2.88			2.99			2.92			4		(7	)
Tax equivalent yield on interest earning assets	4.47			4.64			4.66			19		2
Cost of total deposits	0.55			0.88			0.91			36		3
Cost of interest bearing deposits	0.68			1.09			1.14			46		5
Cost of borrowings	2.23			2.53			2.54			31		1
Cost of interest bearing liabilities	1.06			1.39			1.38			32		(1	)
Tax equivalent net interest margin⁵	3.62			3.54			3.58			(4	)	4

Average commercial loans	$	15,194,186		$	16,237,855		$	16,996,838		11.9	%	4.7	%
Average loans, including loans held for sale	20,339,964			20,412,274			19,912,839			(2.1	)	(2.4	)
Average investment securities	6,751,528			6,334,694			5,883,269			(12.9	)	(7.1	)
Average total interest earning assets	27,757,380			27,414,224			26,377,053			(5.0	)	(3.8	)
Average deposits and mortgage escrow	20,768,669			21,316,126			21,148,872			1.8		(0.8	)

⁵ Tax equivalent net interest margin is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.

Second quarter 2019 compared with second quarter 2018

Net interest income was $231.8 million for the quarter ended June 30, 2019, a decrease of $14.4 million compared to the second quarter of 2018. This was mainly due to a $1.4 billion decline in average earning assets and the increase in the cost of interest bearing liabilities. Other key components of the changes in net interest income and net interest margin for the second quarter 2019 compared to the second quarter 2018 were the following:

The yield on loans was 5.20% compared to 5.01% for the three months ended June 30, 2018. The increase in yield on loans was mainly due an increase in the average balance of higher yielding commercial loans of $1.8 billion, and a decrease in the average balance of lower yielding residential mortgage loans of $2.2 billion. Accretion income on acquired loans was $23.7 million in the second quarter of 2019 compared to $28.0 million in the second quarter of 2018.
The tax equivalent yield on investment securities was 2.92% compared to 2.88% for the three months ended June 30, 2018. Average investment securities were $5.9 billion, or 22.3%, of average total interest earning assets for the second quarter of 2019 compared to $6.8 billion, or 24.3%, of average total interest earning assets for the second quarter of 2018. The decline in the average balance of investment securities was mainly due to the sale of $0.0 million of lower yielding securities to fund the commercial loan portfolio acquired from Woodforest National Bank and as part of our balance sheet transition strategy.
The tax equivalent yield on interest earning assets increased 19 basis points between the periods to 4.66%.
The cost of total deposits was 91 basis points and the cost of borrowings was 2.54%, compared to 55 basis points and 2.23%, respectively, for the same period a year ago. The increase was mainly due to increases in market rates of interest.
The total cost of interest bearing liabilities increased 32 basis points to 1.38% for the second quarter of 2019 compared to 1.06% for the second quarter of 2018, which was mainly due to the increase in market interest rates.
Average interest bearing deposits increased by $122.9 million and average borrowings decreased $1.9 billion compared to the second quarter of 2018. The decline in average borrowings was mainly due to the residential mortgage loan and investment securities sales that were completed in the first quarter of 2019. Total interest expense increased by $11.9 million compared to the second quarter of 2018.

The tax equivalent net interest margin was 3.58% for the second quarter of 2019 compared to 3.62% for the second quarter of 2018. The decrease in tax equivalent net interest margin was mainly due to the increase in the cost of interest bearing liabilities and the decrease in accretion income on acquired loans. Excluding accretion income, tax equivalent net interest margin was 3.22% for the second quarter of 2019 compared to 3.21% in the second quarter of 2018.

Second quarter 2019 compared with linked quarter ended March 31, 2019

Net interest income declined $3.7 million for the quarter ended June 30, 2019 compared to the linked quarter. The decrease in net interest income was mainly due to lower average balances of residential mortgage loans and investment securities due to the asset sales that were completed in the first quarter of 2019. In aggregate, the average balance of interest-earning assets declined $1.0 billion between the periods. In addition, accretion income on acquired loans also decreased between the two periods. Other key components of the changes in net interest income and net interest margin for the second quarter of 2019 compared to the linked quarter were the following:

The yield on loans was 5.20% compared to 5.17% for the linked quarter. The increase in the yield on loans was mainly driven by the change in composition of our loan portfolio as the average balance of residential mortgage loans declined by $1.2 billion and the average balance of commercial loans increased by $759.0 million. The growth in commercial loans was due to organic growth generated by our commercial banking teams and loan portfolio acquisitions. Accretion income on acquired loans was $23.7 million, a decrease of $1.8 million relative to the linked quarter.
The tax equivalent yield on investment securities was 2.92% compared to 2.99% for the linked quarter. The decrease in yield was mainly due to accelerated amortization of securities premiums related to repayments of mortgage-backed securities, which occurred as a result of the declining interest rate environment.
The tax equivalent yield on interest earning assets was 4.66% compared to 4.64% in the linked quarter.
The cost of total deposits increased three basis points to 91 basis points and the total cost of borrowings increased one basis point to 2.54%.
Average interest bearing deposits decreased by $137.9 million and average borrowings decreased by $921.5 million relative to the linked quarter. Total interest expense decreased by $3.3 million from the linked quarter.

The tax equivalent net interest margin was 3.58% compared to 3.54% in the linked quarter. Excluding accretion income on acquired loans, tax equivalent net interest margin was 3.22% compared to 3.16% in the linked quarter.

Non-interest Income

($ in thousands)	For the three months ended									Change %
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Total non-interest income	$	37,868		$	19,597		$	27,058		(28.5	)%	38.1	%
Net (loss) on sale of securities	(425		)	(13,184		)	(528		)	24.2		(96.0	)
Net gain on sale of residential mortgage loans	—			8,313			—			NM		NM
Net gain on sale of fixed assets	11,797			—			—			NM		NM
Adjusted non-interest income	$	26,496		$	24,468		$	27,586		4.1		12.7

Second quarter 2019 compared with second quarter 2018

Excluding net (loss) on sale of securities and net gain on sale of fixed assets, adjusted non-interest income increased $1.1 million in the second quarter of 2019 to $27.6 million, compared to $26.5 million in the same quarter last year. The change was mainly due to higher loan commissions and fees generated by our commercial banking teams and higher accounts receivable management / factoring commissions and other related fees.

In the second quarter of 2019, we realized a loss of $528 thousand on the sale of available for sale securities compared to $425 thousand in the year earlier period.

In the second quarter of 2018, we sold the Lake Success facility and realized a pre tax gain of $11.8 million.

Second quarter 2019 compared with linked quarter ended March 31, 2019

Excluding net (loss) on sale of securities and net gain on sale of residential mortgage loans, adjusted non-interest income increased approximately $3.1 million from $24.5 million in the linked quarter to $27.6 million in the second quarter of 2019. The increase was mainly due to higher deposit fees and service charges, higher accounts receivable management / factoring commissions and other related fees and higher loan commissions and fees.

In the first quarter of 2019, we sold $0.0 million of available for sale securities and realized a loss on sale of $13.2 million. The securities were sold as we execute our strategy of repositioning our balance sheet and interest earning assets to a more optimal mix.

In the first quarter of 2019, we sold $1.3 billion of residential mortgage loans and realized a gain of $8.3 million.

Non-interest Expense

($ in thousands)	For the three months ended									Change % / bps
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Compensation and benefits	$	56,159		$	55,990		$	54,473		(3.0	)%	(2.7	)%
Stock-based compensation plans	3,336			5,123			4,605			38.0		(10.1	)
Occupancy and office operations	17,939			16,535			16,106			(10.2	)	(2.6	)
Information technology	9,997			8,675			9,047			(9.5	)	4.3
Amortization of intangible assets	5,865			4,826			4,785			(18.4	)	(0.8	)
FDIC insurance and regulatory assessments	5,495			3,338			2,994			(45.5	)	(10.3	)
Other real estate owned (“OREO”), net	(226		)	217			458			(302.7	)	111.1
Impairment related to financial centers and real estate consolidation strategy	—			—			14,398			NM		NM
Charge for asset write-downs, systems integration, retention and severance	13,132			3,344			—			NM		NM
Other expenses	13,231			16,944			20,074			51.7		18.5
Total non-interest expense	$	124,928		$	114,992		$	126,940		1.6		10.4
Full time equivalent employees (“FTEs”) at period end	2,037			1,855			1,820			(10.7	)	(1.9	)
Financial centers at period end	121			99			97			(19.8	)	(2.0	)
Operating efficiency ratio, as reported	44.0		%	45.1		%	49.0		%	(500	)	(390	)
Operating efficiency ratio, as adjusted	38.3			40.5			40.9			(260	)	(40	)

Second quarter 2019 compared with second quarter 2018
Total non-interest expense increased $2.0 million relative to the second quarter of 2018. Key components of the change in non-interest expense between the periods were the following:

Compensation and benefits decreased $1.7 million, mainly due to the decline in total FTEs between the periods. Total FTEs declined to 1,820 from 2,037, which was mainly due to the completion of the integration and ongoing financial center consolidation strategy following the merger with Astoria Financial Corporation (“Astoria”) (the “Astoria Merger”). This was partially offset by the hiring of commercial bankers, business development officers, risk management personnel and personnel retained in connection with the Advantage Funding and Woodforest commercial finance acquisitions.
Occupancy and office operations expense decreased $1.8 million mainly due to the consolidation of financial centers and other locations acquired in the Astoria Merger. We consolidated 24 financial centers and two back office locations over the past twelve months. We anticipate consolidating 10 additional financial centers and three back office locations over the balance of 2019 and are targeting a total financial center count of below 85 financial centers over the next 12 to 18 months.
Information technology expense decreased $1.0 million, mainly due to the completion of the conversion of Astoria’s legacy deposit systems in the third quarter of 2018.
FDIC insurance and regulatory assessments decreased $2.5 million to $3.0 million in the second quarter of 2019, compared to $5.5 million in the second quarter of 2018. This was mainly due to a decrease in FDIC deposit insurance expense.
OREO expense, net, increased $684 thousand to $458 thousand, compared to income of $226 thousand for the second quarter of 2018. In the second quarter of 2019, OREO expense, net, included gain on sale of $285 thousand, which was offset by $409 thousand of write-downs and $368 thousand of operating costs.
In connection with our financial center and back-office consolidation strategy, we recorded an impairment charge of $14.4 million related to the write-off of leasehold improvements, land and buildings, and the early termination of several leases.
Other expenses increased $6.8 million to $20.1 million, which was mainly due to a legal settlement charge of $1.1 million related to a troubled loan relationship that was acquired in a prior merger, and an increase in operational losses, which were $1.9 million and mainly related to check fraud and ATM losses. Other items that resulted in the increase in other expenses were a $1.5 million increase in consulting expense related to various back-office automation projects and an increase of $323 thousand in defined benefit pension plan expense.

Second quarter 2019 compared with linked quarter ended March 31, 2019
Total non-interest expense increased $11.9 million to $126.9 million in the second quarter of 2019. Key components of the change in non-interest expense were the following:

Compensation and benefits decreased $1.5 million to $54.5 million in the second quarter of 2019. The decrease was mainly due to lower payroll taxes and benefits expense. Total FTEs declined to 1,820 at June 30, 2019 from 1,855 at March 31, 2019.
Stock-based compensation plans decreased $518 thousand to $4.6 million in the second quarter of 2019. The decrease was mainly due to the vesting of performance-based awards granted in February 2016.
FDIC insurance and regulatory assessments decreased $344 thousand mainly due to lower FDIC insurance premiums.
Charge for asset write-downs, systems integration, retention and severance was incurred in the amount of $3.3 million in the linked quarter ended March 31, 2019 in connection with the commercial loan portfolio and origination platform acquisition from Woodforest National Bank.
Other expenses increased $3.1 million, which was mainly due to the legal settlement and operating losses discussed above.

Taxes
We recorded income tax expense equal to 19.9% of pre-tax income for the three months ended June 30, 2019, which resulted in an estimated effective tax rate of 21.0% for the six months ended June 30, 2019. For the three months ended March 31, 2019 and June 30, 2018, we recorded income at an estimated effective income tax rate of 22.0% and 21.8%, respectively.

Our effective tax rate for the full year 2019 is currently estimated at 21.0%. This is the effective tax rate used for purposes of calculating adjusted earnings per share available to common stockholders for the three months and six months ended June 30, 2019.

Key Balance Sheet Highlights as of June 30, 2019

($ in thousands)	As of									Change % / bps
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Total assets	$	31,463,077		$	29,956,607		$	30,237,545		(3.9	)%	0.9	%
Total portfolio loans, gross	20,674,493			19,908,473			20,370,306			(1.5	)	2.3
Commercial & industrial (“C&I”) loans	6,288,683			7,265,187			7,514,834			19.5		3.4
Commercial real estate loans (including multi-family)	9,160,760			9,516,013			9,714,037			6.0		2.1
Acquisition, development and construction loans	236,915			290,875			338,973			43.1		16.5
Total commercial loans	15,686,358			17,072,075			17,567,844			12.0		2.9
Residential mortgage loans	4,652,501			2,549,284			2,535,667			(45.5	)	(0.5	)
Bank owned life insurance	657,637			657,504			598,880			(8.9	)	(8.9	)
Total deposits	20,965,889			21,225,639			20,948,464			(0.1	)	(1.3	)
Core deposits⁶	19,870,947			20,160,733			19,893,875			0.1		(1.3	)
Municipal deposits (included in core deposits)	1,652,733			2,027,563			1,699,824			2.8		(16.2	)
Investment securities	6,789,246			5,915,050			5,858,865			(13.7	)	(0.9	)
Total borrowings	5,537,537			3,633,480			4,133,986			(25.3	)	13.8
Loans to deposits	98.6		%	93.8		%	97.2		%	(140	)	340
Core deposits to total deposits	94.8			95.0			95.0			20		—
Investment securities to total assets	21.6			19.7			19.4			(220	)	(30	)

⁶Core deposits include retail, commercial and municipal transaction, money market, savings accounts and certificates of deposits accounts, and reciprocal Certificate of Deposit Account Registry balances and exclude brokered and wholesale deposits.

Highlights in balance sheet items as of June 30, 2019 were the following:

C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factored receivables, equipment financing and public sector finance loans) represented 36.9%, commercial real estate loans (which include multi-family loans) represented 47.7%, consumer and residential mortgage loans combined represented 13.7%; and acquisition, development and construction loans represented 1.7% of total portfolio loans, respectively. At June 30, 2018, C&I loans represented 30.4%; commercial real estate loans (which include multi-family loans) represented 44.3%; consumer and residential mortgage loans combined represented 24.1%; and acquisition, development and construction loans represented 1.2% of total portfolio loans, respectively. We are making significant progress towards our goal of a loan mix comprised of 45% for each of C&I and commercial real estate loans and 10% other loans.
ADC loans increased $48.1 million over the linked quarter and $102.1 million since June 30, 2018. The increase was mainly related to construction loans associated with our low income housing tax credits.
Total commercial loans, which include all C&I loans, commercial real estate (including multi-family) and acquisition, development and construction loans, increased by $495.8 million over the linked quarter and $1.9 billion since June 30, 2018.
Residential mortgage loans held in our loan portfolio were $2.5 billion at June 30, 2019, a decline of $13.6 million from the linked quarter and a decline of $2.1 billion from a year ago. In the second quarter of 2019, we transferred residential mortgage loans with a balance of $128.1 million held for sale to portfolio loans. The carrying value of the loans approximated the fair value. We sold $1.3 billion of residential mortgage loans held for sale in the first quarter of 2019 and sold $94.6 million of residential mortgage loans held for sale in the second quarter of 2019.
The balance of bank owned life insurance decreased by $58.6 million relative to the prior quarter and was $598.9 million at June 30, 2019. The decrease is related to the restructuring of the legacy Astoria bank owned life insurance program, which is expected to be completed in the third quarter of 2019.
Total deposits at June 30, 2019 decreased $277.2 million compared to March 31, 2019, and total deposits decreased $17.4 million compared to June 30, 2018.
Core deposits at June 30, 2019 were $19.9 billion and decreased $266.9 million compared to March 31, 2019, and increased $22.9 million over June 30, 2018.
Municipal deposits at June 30, 2019 were $1.7 billion, and decreased $327.7 million relative to March 31, 2019. This decline was due to seasonal outflows. The balance at June 30, 2019 increased $47.1 million compared to a year ago.

Investment securities decreased by $930.4 million from June 30, 2018, and represented 19.4% of total assets at June 30, 2019. In connection with the adoption of a new accounting standard, effective January 1, 2019, we transferred held-to-maturity securities with a fair value of $708.6 million to available for sale. We sold securities with a book value of $0.5 million to fund the commercial loan portfolio acquired from Woodforest National Bank, and to reduce lower yielding securities as a percentage of total assets.
Total borrowings at June 30, 2019 were $4.1 billion, and increased $500.5 million relative to March 31, 2019, to fund loan growth.

Credit Quality

($ in thousands)	For the three months ended									Change % / bps
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Provision for loan losses	$	13,000		$	10,200		$	11,500		(11.5	)%	12.7	%
Net charge-offs	9,066			6,917			5,796			(36.1	)	(16.2	)
Allowance for loan losses	86,026			98,960			104,664			21.7		5.8
Non-performing loans	190,975			170,415			192,647			0.9		13.0
Loans 30 to 89 days past due	73,441			64,260			76,365			4.0		18.8
Annualized net charge-offs to average loans	0.18		%	0.14		%	0.12		%	(6	)	(2	)
Special mention loans	119,718			128,054			118,940			(0.6	)	(7.1	)
Substandard loans	251,840			288,694			311,418			23.7		7.9
Allowance for loan losses to total loans	0.42			0.50			0.51			9		1
Allowance for loan losses to non-performing loans	45.0			58.1			54.3			930		(380	)

Provision for loan losses was $11.5 million for the quarter ended June 30, 2019 and was $5.7 million in excess of net charge-offs of $5.8 million. Allowance coverage ratios were 0.51% of total loans and 54.3% of non-performing loans at June 30, 2019. Strong organic commercial loan growth increased the total allowance for loan losses requirement. Note that due to our various acquisitions and mergers, a significant portion of the Company’s loan portfolio does not carry an allowance for loan losses, as the acquired loans are recorded at their estimated fair value on the acquisition date.

Non-performing loans increased by $22.2 million to $192.6 million at June 30, 2019 compared to the linked quarter, and net charge-offs declined to 12 basis points of total loans on an annualized basis. Loans 30 to 89 days past due increased $12.1 million from the linked quarter.

Special mention loans decreased $9.1 million and substandard loans increased $22.7 million in the second quarter of 2019 compared to the linked quarter. The increase in substandard loans was due to deterioration in two asset-based lending relationships and one commercial real estate relationship. In addition to the two relationships that moved to substandard from special mention, there was a $14.8 million asset-based lending loan that was designated substandard at June 30, 2019.

Capital

($ in thousands, except share and per share data)	As of									Change % / bps
	6/30/2018			3/31/2019			6/30/2019			Y-o-Y		Linked Qtr
Total stockholders’ equity	$	4,352,735		$	4,419,223		$	4,459,158		2.4	%	0.9	%
Preferred stock	138,828			138,218			138,011			(0.6	)	(0.1	)
Goodwill and other intangible assets	1,754,418			1,782,533			1,777,748			1.3		(0.3	)
Tangible common stockholders’ equity	$	2,459,489		$	2,498,472		$	2,543,399		3.4		1.8
Common shares outstanding	225,470,254			209,560,824			205,187,243			(9.0	)	(2.1	)
Book value per common share	$	18.69		$	20.43		$	21.06		12.7		3.1
Tangible book value per common share⁷	10.91			11.92			12.40			13.6		4.0
Tangible common equity to tangible assets ⁷	8.28		%	8.87		%	8.94		%	66		7
Estimated Tier 1 leverage ratio - Company	9.32			9.21			9.57			25		36
Estimated Tier 1 leverage ratio - Bank	9.84			9.58			9.98			14		40
⁷See a reconciliation of non-GAAP financial measures beginning on page 18.

Total stockholders’ equity increased $39.9 million to $4.5 billion as of June 30, 2019 compared to March 31, 2019 and increased $106.4 million compared to June 30, 2018. For the second quarter of 2019, net income available to common stockholders of $94.5 million and an increase in the fair value of our available for sale investment securities of $47.0 million was offset by common dividends of $14.6 million, preferred dividends of $2.2 million and common stock repurchases of $92.9 million.

Total goodwill and other intangible assets were $1.8 billion at June 30, 2019, a decrease of $4.8 million compared to March 31, 2019, which was due to amortization.

Basic and diluted weighted average common shares outstanding declined relative to the linked quarter by approximately 6.2 million shares and were 206.9 million shares and 207.4 million shares, respectively. Total common shares outstanding at June 30, 2019 were approximately 205.2 million. In the second quarter of 2019, we repurchased 4,502,053 shares of common stock at a weighted average price of $20.64 per share, for total consideration of $92.9 million. Under our Board of Directors approved repurchase program we have 8,380,581 shares remaining for repurchase at June 30, 2019, and we anticipate completing the repurchase program in the second half of 2019.

Tangible book value per common share was $12.40 at June 30, 2019, which represented an increase of 13.6% over a year ago and an increase of 4.0% over March 31, 2019.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Thursday, July 25, 2019 at 10:30 AM Eastern Time to discuss the Company’s results. Analysts, investors and interested parties are invited to listen to the webcast and view accompanying slides on the Company’s website at www.sterlingbancorp.com or by dialing (888) 394-8218, Conference ID #7082382. A replay of the teleconference can be accessed through the Company’s website.

About Sterling Bancorp
Sterling Bancorp, whose principal subsidiary is Sterling National Bank, specializes in the delivery of services and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers. Sterling National Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Sterling Bancorp website at www.sterlingbancorp.com.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp’s current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: business disruption; a failure to grow revenues faster than we grow expenses; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp’s actual results to differ from those indicated in forward-looking statements are included in the “Risk Factors” section of Sterling Bancorp’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.


Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)

	6/30/2018			12/31/2018			6/30/2019
Assets:
Cash and cash equivalents	$	445,189		$	438,110		$	343,368
Investment securities	6,789,246			6,667,180			5,858,865
Loans held for sale	30,626			1,565,979			27,221
Portfolio loans:
Commercial and industrial (“C&I”)	6,288,683			6,533,386			7,514,834
Commercial real estate (including multi-family)	9,160,760			9,406,541			9,714,037
Acquisition, development and construction	236,915			267,754			338,973
Residential mortgage	4,652,501			2,705,226			2,535,667
Consumer	335,634			305,623			266,795
Total portfolio loans, gross	20,674,493			19,218,530			20,370,306
Allowance for loan losses	(86,026		)	(95,677		)	(104,664		)
Total portfolio loans, net	20,588,467			19,122,853			20,265,642
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank Stock, at cost	380,404			369,690			320,560
Accrued interest receivable	103,095			107,111			106,317
Premises and equipment, net	290,762			264,194			250,155
Goodwill	1,613,144			1,613,033			1,657,814
Other intangibles	141,274			129,545			119,934
Bank owned life insurance	657,637			653,995			598,880
Other real estate owned	20,264			19,377			13,628
Other assets	402,969			432,240			675,161
Total assets	$	31,463,077		$	31,383,307		$	30,237,545
Liabilities:
Deposits	$	20,965,889		$	21,214,148		$	20,948,464
FHLB borrowings	5,067,492			4,838,772			3,766,224
Other borrowings	19,114			21,338			20,901
Senior notes	278,103			181,130			173,800
Subordinated notes	172,828			172,943			173,061
Mortgage escrow funds	130,629			72,891			73,176
Other liabilities	476,287			453,232			622,761
Total liabilities	27,110,342			26,954,454			25,778,387
Stockholders’ equity:
Preferred stock	138,828			138,423			138,011
Common stock	2,299			2,299			2,299
Additional paid-in capital	3,769,505			3,776,461			3,757,126
Treasury stock	(51,269		)	(213,935		)	(447,748		)
Retained earnings	592,953			791,550			969,124
Accumulated other comprehensive (loss) income	(99,581		)	(65,945		)	40,346
Total stockholders’ equity	4,352,735			4,428,853			4,459,158
Total liabilities and stockholders’ equity	$	31,463,077		$	31,383,307		$	30,237,545

Shares of common stock outstanding at period end	225,470,254			216,227,852			205,187,243
Book value per common share	$	18.69		$	19.84		$	21.06
Tangible book value per common share¹	10.91			11.78			12.40
¹ See reconciliation of non-GAAP financial measures beginning on page 18.


Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)

	For the Quarter Ended									For the Six Months Ended
	6/30/2018			3/31/2019			6/30/2019			6/30/2018			6/30/2019
Interest and dividend income:
Loans and loan fees	$	254,253		$	260,295		$	258,283		$	488,868		$	518,578
Securities taxable	29,031			27,847			24,632			56,092			52,479
Securities non-taxable	15,403			14,857			14,423			30,715			29,280
Other earning assets	6,219			6,401			5,119			10,576			11,520
Total interest and dividend income	304,906			309,400			302,457			586,251			611,857
Interest expense:
Deposits	28,464			45,995			48,129			52,671			94,124
Borrowings	30,226			27,899			22,489			52,996			50,388
Total interest expense	58,690			73,894			70,618			105,667			144,512
Net interest income	246,216			235,506			231,839			480,584			467,345
Provision for loan losses	13,000			10,200			11,500			26,000			21,700
Net interest income after provision for loan losses	233,216			225,306			220,339			454,584			445,645
Non-interest income:
Deposit fees and service charges	6,985			6,212			7,098			13,988			13,310
Accounts receivable management / factoring commissions and other related fees	5,337			5,423			5,794			10,696			11,217
Bank owned life insurance	4,243			3,641			4,192			7,857			7,833
Loan commissions and fees	4,566			3,838			5,308			7,973			9,146
Investment management fees	2,121			1,900			2,050			3,946			3,950
Net (loss) on sale of securities	(425		)	(13,184		)	(528		)	(5,846		)	(13,712		)
Gain on sale of residential mortgage loans	—			8,313			—			—			8,313
Gain on sale of fixed assets	11,797			—			—			11,800			—
Other	3,244			3,454			3,144			6,161			6,598
Total non-interest income	37,868			19,597			27,058			56,575			46,655
Non-interest expense:
Compensation and benefits	56,159			55,990			54,473			110,840			110,463
Stock-based compensation plans	3,336			5,123			4,605			6,190			9,728
Occupancy and office operations	17,939			16,535			16,106			35,399			32,641
Information technology	9,997			8,675			9,047			21,713			17,722
Amortization of intangible assets	5,865			4,826			4,785			11,917			9,611
FDIC insurance and regulatory assessments	5,495			3,338			2,994			10,841			6,332
Other real estate owned, net	(226		)	217			458			138			675
Impairment related to financial centers and real estate consolidation strategy	—			—			14,398			—			14,398
Charge for asset write-downs, systems integration, retention and severance	13,132			3,344			—			13,132			3,344
Other	13,231			16,944			20,074			26,505			37,018
Total non-interest expense	124,928			114,992			126,940			236,675			241,932
Income before income tax expense	146,156			129,911			120,457			274,484			250,368
Income tax expense	31,915			28,474			23,997			61,371			52,471
Net income	114,241			101,437			96,460			213,113			197,897
Preferred stock dividend	1,996			1,989			1,987			3,995			3,976
Net income available to common stockholders	$	112,245		$	99,448		$	94,473		$	209,118		$	193,921
Weighted average common shares:
Basic	225,084,232			213,157,090			206,932,114			224,908,436			210,022,967
Diluted	225,621,856			213,505,842			207,376,239			225,444,579			210,419,425
Earnings per common share:
Basic earnings per share	$	0.50		$	0.47		$	0.46		$	0.93		$	0.92
Diluted earnings per share	0.50			0.47			0.46			0.93			0.92
Dividends declared per share	0.07			0.07			0.07			0.14			0.14


Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)

	As of and for the Quarter Ended
End of Period	6/30/2018		9/30/2018		12/31/2018		3/31/2019		6/30/2019
Total assets	$	31,463,077	$	31,261,265	$	31,383,307	$	29,956,607	$	30,237,545
Tangible assets ¹	29,708,659		29,516,084		29,640,729		28,174,074		28,459,797
Securities available for sale	3,929,386		3,843,244		3,870,563		3,847,799		3,843,112
Securities held to maturity	2,859,860		2,842,728		2,796,617		2,067,251		2,015,753
Loans held for sale²	30,626		31,042		1,565,979		248,972		27,221
Portfolio loans	20,674,493		20,533,214		19,218,530		19,908,473		20,370,306
Goodwill	1,613,144		1,609,772		1,613,033		1,657,814		1,657,814
Other intangibles	141,274		135,409		129,545		124,719		119,934
Deposits	20,965,889		21,456,057		21,214,148		21,225,639		20,948,464
Municipal deposits (included above)	1,652,733		2,019,893		1,751,670		2,027,563		1,699,824
Borrowings	5,537,537		4,825,855		5,214,183		3,633,480		4,133,986
Stockholders’ equity	4,352,735		4,438,303		4,428,853		4,419,223		4,459,158
Tangible common equity ¹	2,459,489		2,554,495		2,547,852		2,498,472		2,543,399
Quarterly Average Balances
Total assets	30,994,904		31,036,026		30,925,281		30,742,943		29,666,951
Tangible assets ¹	29,237,608		29,283,093		29,179,942		28,986,437		27,886,066
Loans, gross:
Commercial real estate (includes multi-family)	9,100,098		9,170,117		9,341,579		9,385,420		9,486,333
Acquisition, development and construction	247,500		252,710		279,793		284,299		307,290
Commercial and industrial:
Traditional commercial and industrial	2,026,313		2,037,195		2,150,644		2,418,027		2,446,676
Asset-based lending³	778,708		820,060		812,903		876,218		1,070,841
Payroll finance³	219,545		223,636		223,061		197,809		196,160
Warehouse lending³	731,385		857,280		690,277		710,776		990,843
Factored receivables³	224,159		220,808		267,986		250,426		246,382
Equipment financing³	1,140,803		1,158,945		1,147,269		1,245,051		1,285,095
Public sector finance³	725,675		784,260		828,153		869,829		967,218
Total commercial and industrial	5,846,588		6,102,184		6,120,293		6,568,136		7,203,215
Residential mortgage	4,801,595		4,531,922		4,336,083		3,878,991		2,635,903
Consumer	344,183		330,061		311,475		295,428		280,098
Loans, total⁴	20,339,964		20,386,994		20,389,223		20,412,274		19,912,839
Securities (taxable)	4,130,949		4,193,910		4,133,456		3,833,690		3,453,858
Securities (non-taxable)	2,620,579		2,580,802		2,552,533		2,501,004		2,429,411
Other interest earning assets	665,888		638,227		635,443		667,256		580,945
Total earning assets	27,757,380		27,799,933		27,710,655		27,414,224		26,377,053
Deposits:
Non-interest bearing demand	3,960,683		4,174,908		4,324,247		4,247,389		4,218,000
Interest bearing demand	4,024,972		4,286,278		4,082,526		4,334,266		4,399,296
Savings (including mortgage escrow funds)	2,916,755		2,678,662		2,535,098		2,460,247		2,448,132
Money market	7,337,904		7,404,208		7,880,331		7,776,501		7,538,890
Certificates of deposit	2,528,355		2,571,298		2,530,226		2,497,723		2,544,554
Total deposits and mortgage escrow	20,768,669		21,115,354		21,352,428		21,316,126		21,148,872
Borrowings	5,432,582		5,052,752		4,716,522		4,466,172		3,544,661
Stockholders’ equity	4,305,928		4,397,823		4,426,118		4,415,449		4,423,910
Tangible common equity ¹	2,409,674		2,506,198		2,542,256		2,520,595		2,504,883

¹ See a reconciliation of non-GAAP financial measures beginning on page 18.
²At December 31, 2018 and March 31, 2019, loans held for sale included $1.54 billion and $222 million of residential mortgage loans, respectively, the other balances of loans held for sale are commercial syndication loans.
³Asset-based lending, payroll finance, warehouse lending, factored receivables, equipment finance and public sector finance comprise our commercial finance loan portfolio.
⁴Includes loans held for sale, but excludes allowance for loan losses.


Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS
(unaudited, in thousands, except share and per share data)

	As of and for the Quarter Ended
Per Common Share Data	6/30/2018			9/30/2018			12/31/2018			3/31/2019			6/30/2019
Basic earnings per share	$	0.50		$	0.52		$	0.51		$	0.47		$	0.46
Diluted earnings per share	0.50			0.52			0.51			0.47			0.46
Adjusted diluted earnings per share, non-GAAP ¹	0.50			0.51			0.52			0.50			0.51
Dividends declared per common share	0.07			0.07			0.07			0.07			0.07
Book value per common share	18.69			19.07			19.84			20.43			21.06
Tangible book value per common share¹	10.91			11.33			11.78			11.92			12.40
Shares of common stock o/s	225,470,254			225,446,089			216,227,852			209,560,824			205,187,243
Basic weighted average common shares o/s	225,084,232			225,088,511			222,319,682			213,157,090			206,932,114
Diluted weighted average common shares o/s	225,621,856			225,622,895			222,769,369			213,505,842			207,376,239
Performance Ratios (annualized)
Return on average assets	1.45		%	1.50		%	1.44		%	1.31		%	1.28		%
Return on average equity	10.46			10.61			10.08			9.13			8.57
Return on average tangible assets	1.54			1.59			1.53			1.39			1.36
Return on average tangible common equity	18.68			18.63			17.56			16.00			15.13
Return on average tangible assets, adjusted ¹	1.55			1.55			1.58			1.48			1.51
Return on avg. tangible common equity, adjusted ¹	18.79			18.09			18.17			17.04			16.83
Operating efficiency ratio, as adjusted ¹	38.3			38.9			38.0			40.5			40.9
Analysis of Net Interest Income
Accretion income on acquired loans	$	28,010		$	26,574		$	27,016		$	25,580		$	23,745
Yield on loans	5.01		%	5.01		%	5.07		%	5.17		%	5.20		%
Yield on investment securities - tax equivalent ²	2.88			2.87			2.92			2.99			2.92
Yield on interest earning assets - tax equivalent ²	4.47			4.47			4.54			4.64			4.66
Cost of interest bearing deposits	0.68			0.84			0.97			1.09			1.14
Cost of total deposits	0.55			0.68			0.77			0.88			0.91
Cost of borrowings	2.23			2.29			2.43			2.53			2.54
Cost of interest bearing liabilities	1.06			1.17			1.28			1.39			1.38
Net interest rate spread - tax equivalent basis ²	3.41			3.30			3.26			3.25			3.28
Net interest margin - GAAP basis	3.56			3.48			3.48			3.48			3.53
Net interest margin - tax equivalent basis ²	3.62			3.54			3.53			3.54			3.58
Capital
Tier 1 leverage ratio - Company ³	9.32		%	9.68		%	9.50		%	9.21		%	9.57		%
Tier 1 leverage ratio - Bank only ³	9.84			10.10			9.94			9.58			9.98
Tier 1 risk-based capital ratio - Bank only ³	13.71			14.23			13.55			13.13			12.68
Total risk-based capital ratio - Bank only ³	14.94			15.50			14.06			14.41			13.95
Tangible common equity - Company¹	8.28			8.65			8.60			8.87			8.94
Condensed Five Quarter Income Statement
Interest and dividend income	$	304,906		$	309,025		$	313,197		$	309,400		$	302,457
Interest expense	58,690			65,076			70,326			73,894			70,618
Net interest income	246,216			243,949			242,871			235,506			231,839
Provision for loan losses	13,000			9,500			10,500			10,200			11,500
Net interest income after provision for loan losses	233,216			234,449			232,371			225,306			220,339
Non-interest income	37,868			24,145			22,475			19,597			27,058
Non-interest expense	124,928			111,773			109,921			114,992			126,940
Income before income tax expense	146,156			146,821			144,925			129,911			120,457
Income tax expense	31,915			27,171			30,434			28,474			23,997
Net income	$	114,241		$	119,650		$	114,491		$	101,437		$	96,460

¹ See a reconciliation of non-GAAP financial measures beginning on page 18.
² Tax equivalent basis represents interest income earned on tax exempt securities divided by the applicable Federal tax rate of 21%.
³Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company’s and Bank’s regulatory reports.


Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION
(unaudited, in thousands, except share and per share data)

	As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward	6/30/2018			9/30/2018			12/31/2018			3/31/2019			6/30/2019
Balance, beginning of period
Provision for loan losses	13,000			9,500			10,500			10,200			11,500
Loan charge-offs¹:
Traditional commercial & industrial	(1,831		)	(3,415		)	(452		)	(4,839		)	(754		)
Asset-based lending	—			—			(4,936		)	—			(3,551		)
Payroll finance	(314		)	(2		)	(21		)	—			(84		)
Factored receivables	(160		)	(18		)	(23		)	(32		)	(27		)
Equipment financing	(2,477		)	(829		)	(1,060		)	(1,249		)	(1,335		)
Commercial real estate	(3,166		)	(359		)	(56		)	(17		)	(238		)
Multi-family	—			(168		)	(140		)	—			—
Acquisition development & construction	(721		)	—			—			—			—
Residential mortgage	(544		)	(114		)	(694		)	(1,085		)	(689		)
Consumer	(491		)	(458		)	(335		)	(443		)	(467		)
Total charge offs	(9,704		)	(5,363		)	(7,717		)	(7,665		)	(7,145		)
Recoveries of loans previously charged-off¹:
Traditional commercial & industrial	225			235			404			139			445
Asset-based lending	9			—			—			—			—
Payroll finance	7			5			10			1			3
Factored receivables	2			2			7			121			4
Equipment financing	190			85			604			131			79
Commercial real estate	74			612			185			9			649
Multi-family	—			4			276			103			6
Residential mortgage	34			5			11			1			1
Consumer	97			254			32			243			162
Total recoveries	638			1,202			1,529			748			1,349
Net loan charge-offs	(9,066		)	(4,161		)	(6,188		)	(6,917		)	(5,796		)
Balance, end of period	$	86,026		$	91,365		$	95,677		$	98,960		$	104,664
Asset Quality Data and Ratios
Non-performing loans (“NPLs”) non-accrual	$	178,626		$	177,876		$	166,400		$	166,746		$	192,109
NPLs still accruing	12,349			7,346			2,422			3,669			538
Total NPLs	190,975			185,222			168,822			170,415			192,647
Other real estate owned	20,264			22,735			19,377			16,502			13,628
Non-performing assets (“NPAs”)	$	211,239		$	207,957		$	188,199		$	186,917		$	206,275
Loans 30 to 89 days past due	$	73,441		$	50,084		$	97,201		$	64,260		$	76,365
Net charge-offs as a % of average loans (annualized)	0.18		%	0.08		%	0.12		%	0.14		%	0.12		%
NPLs as a % of total loans	0.92			0.90			0.88			0.86			0.95
NPAs as a % of total assets	0.67			0.67			0.60			0.62			0.68
Allowance for loan losses as a % of NPLs	45.0			49.3			56.7			58.1			54.3
Allowance for loan losses as a % of total loans	0.42			0.44			0.50			0.50			0.51
Special mention loans	$	119,718		$	88,472		$	113,180		$	128,054		$	118,940
Substandard loans	251,840			280,358			266,047			288,694			311,418
Doubtful loans	856			2,219			59			—			—

¹There were no charge-offs or recoveries on warehouse lending or public sector finance loans during the periods presented. There were no acquisition development and construction recoveries during the periods presented.

Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)

	For the Quarter Ended
	March 31, 2019								June 30, 2019
	Average balance			Interest			Yield/Rate		Average balance			Interest			Yield/Rate

	(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans	$	6,568,136		$	88,908		5.49	%	$	7,203,215		$	97,260		5.42	%
Commercial real estate (includes multi-family)	9,385,420			114,855			4.96		9,486,333			115,759			4.89
Acquisition, development and construction	284,299			4,341			6.19		307,290			4,664			6.09
Commercial loans	16,237,855			208,104			5.20		16,996,838			217,683			5.14
Consumer loans	295,428			4,096			5.62		280,098			4,013			5.75
Residential mortgage loans	3,878,991			48,095			4.96		2,635,903			36,587			5.55
Total gross loans ¹	20,412,274			260,295			5.17		19,912,839			258,283			5.20
Securities taxable	3,833,690			27,847			2.95		3,453,858			24,632			2.86
Securities non-taxable	2,501,004			18,806			3.01		2,429,411			18,257			3.01
Interest earning deposits	331,954			1,501			1.83		289,208			1,295			1.80
FHLB and Federal Reserve Bank Stock	335,302			4,900			5.93		291,737			3,824			5.26
Total securities and other earning assets	7,001,950			53,054			3.07		6,464,214			48,008			2.98
Total interest earning assets	27,414,224			313,349			4.64		26,377,053			306,291			4.66
Non-interest earning assets	3,328,719								3,289,898
Total assets	$	30,742,943							$	29,666,951
Interest bearing liabilities:
Demand and savings ² deposits	$	6,794,513		$	13,427		0.80	%	$	6,847,428		$	13,767		0.81	%
Money market deposits	7,776,501			22,616			1.18		7,538,890			23,020			1.22
Certificates of deposit	2,497,723			9,952			1.62		2,544,554			11,342			1.79
Total interest bearing deposits	17,068,737			45,995			1.09		16,930,872			48,129			1.14
Senior notes	179,439			1,412			3.15		173,901			1,365			3.14
Other borrowings	4,113,770			24,132			2.38		3,197,738			18,768			2.35
Subordinated notes	172,963			2,355			5.45		173,022			2,356			5.45
Total borrowings	4,466,172			27,899			2.53		3,544,661			22,489			2.54
Total interest bearing liabilities	21,534,909			73,894			1.39		20,475,533			70,618			1.38
Non-interest bearing deposits	4,247,389								4,218,000
Other non-interest bearing liabilities	545,196								549,508
Total liabilities	26,327,494								25,243,041
Stockholders’ equity	4,415,449								4,423,910
Total liabilities and stockholders’ equity	$	30,742,943							$	29,666,951
Net interest rate spread ³							3.25	%							3.28	%
Net interest earning assets ⁴	$	5,879,315							$	5,901,520
Net interest margin - tax equivalent				239,455			3.54	%				235,673			3.58	%
Less tax equivalent adjustment				(3,949		)						(3,834		)
Net interest income				235,506								231,839
Accretion income on acquired loans				25,580								23,745
Tax equivalent net interest margin excluding accretion income on acquired loans				$	213,875		3.16	%				$	211,928		3.22	%
Ratio of interest earning assets to interest bearing liabilities	127.3		%						128.8		%

¹Average balances include loans held for sale and non-accrual loans. Interest includes prepayment fees and late charges.
² Includes club accounts and interest bearing mortgage escrow balances.
³ Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
⁴ Net interest earning assets represents total interest earning assets less total interest bearing liabilities.


Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)

	For the Quarter Ended
	June 30, 2018								June 30, 2019
	Average balance			Interest			Yield/Rate		Average balance			Interest			Yield/Rate

	(Dollars in thousands)
Interest earning assets:
Traditional C&I and commercial finance loans	$	5,846,588		$	78,004		5.35	%	$	7,203,215		$	97,260		5.42	%
Commercial real estate (includes multi-family)	9,100,098			107,930			4.76		9,486,333			115,759			4.89
Acquisition, development and construction	247,500			3,430			5.56		307,290			4,664			6.09
Commercial loans	15,194,186			189,364			5.00		16,996,838			217,683			5.14
Consumer loans	344,183			5,114			5.96		280,098			4,013			5.75
Residential mortgage loans	4,801,595			59,775			4.98		2,635,903			36,587			5.55
Total gross loans ¹	20,339,964			254,253			5.01		19,912,839			258,283			5.20
Securities taxable	4,130,949			29,031			2.82		3,453,858			24,632			2.86
Securities non-taxable	2,620,579			19,497			2.98		2,429,411			18,257			3.01
Interest earning deposits	292,862			784			1.07		289,208			1,295			1.80
FHLB and Federal Reserve Bank stock	373,026			5,435			5.84		291,737			3,824			5.26
Total securities and other earning assets	7,417,416			54,747			2.96		6,464,214			48,008			2.98
Total interest earning assets	27,757,380			309,000			4.47		26,377,053			306,291			4.66
Non-interest earning assets	3,237,524								3,289,898
Total assets	$	30,994,904							$	29,666,951
Interest bearing liabilities:
Demand and savings ² deposits	$	6,941,727		$	8,400		0.49		$	6,847,428		$	13,767		0.81
Money market deposits	7,337,904			12,869			0.70		7,538,890			23,020			1.22
Certificates of deposit	2,528,355			7,195			1.14		2,544,554			11,342			1.79
Total interest bearing deposits	16,807,986			28,464			0.68		16,930,872			48,129			1.14
Senior notes	278,128			2,787			4.01		173,901			1,365			3.14
Other borrowings	4,981,663			25,086			2.02		3,197,738			18,768			2.35
Subordinated notes	172,791			2,353			5.45		173,022			2,356			5.45
Total borrowings	5,432,582			30,226			2.23		3,544,661			22,489			2.54
Total interest bearing liabilities	22,240,568			58,690			1.06		20,475,533			70,618			1.38
Non-interest bearing deposits	3,960,683								4,218,000
Other non-interest bearing liabilities	487,725								549,508
Total liabilities	26,688,976								25,243,041
Stockholders’ equity	4,305,928								4,423,910
Total liabilities and stockholders’ equity	$	30,994,904							$	29,666,951
Net interest rate spread ³							3.41	%							3.28	%
Net interest earning assets ⁴	$	5,516,812							$	5,901,520
Net interest margin - tax equivalent				250,310			3.62	%				235,673			3.58	%
Less tax equivalent adjustment				(4,094		)						(3,834		)
Net interest income				246,216								231,839
Accretion income on acquired loans				28,010								23,745
Tax equivalent net interest margin excluding accretion income on acquired loans				$	222,300		3.21	%				$	211,928		3.22	%
Ratio of interest earning assets to interest bearing liabilities	124.8		%						128.8		%


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 21.
	As of or for the Quarter Ended
	6/30/2018			9/30/2018			12/31/2018			3/31/2019			6/30/2019

The following table shows the reconciliation of stockholders’ equity to tangible common equity and the tangible common equity ratio¹:
Total assets	$	31,463,077		$	31,261,265		$	31,383,307		$	29,956,607		$	30,237,545
Goodwill and other intangibles	(1,754,418		)	(1,745,181		)	(1,742,578		)	(1,782,533		)	(1,777,748		)
Tangible assets	29,708,659			29,516,084			29,640,729			28,174,074			28,459,797
Stockholders’ equity	4,352,735			4,438,303			4,428,853			4,419,223			4,459,158
Preferred stock	(138,828		)	(138,627		)	(138,423		)	(138,218		)	(138,011		)
Goodwill and other intangibles	(1,754,418		)	(1,745,181		)	(1,742,578		)	(1,782,533		)	(1,777,748		)
Tangible common stockholders’ equity	2,459,489			2,554,495			2,547,852			2,498,472			2,543,399
Common stock outstanding at period end	225,470,254			225,446,089			216,227,852			209,560,824			205,187,243
Common stockholders’ equity as a % of total assets	13.39		%	13.75		%	13.67		%	14.29		%	14.29		%
Book value per common share	$	18.69		$	19.07		$	19.84		$	20.43		$	21.06
Tangible common equity as a % of tangible assets	8.28		%	8.65		%	8.60		%	8.87		%	8.94		%
Tangible book value per common share	$	10.91		$	11.33		$	11.78		$	11.92		$	12.40

The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity²:

Average stockholders’ equity	$	4,305,928		$	4,397,823		$	4,426,118		$	4,415,449		$	4,423,910
Average preferred stock	(138,958		)	(138,692		)	(138,523		)	(138,348		)	(138,142		)
Average goodwill and other intangibles	(1,757,296		)	(1,752,933		)	(1,745,339		)	(1,756,506		)	(1,780,885		)
Average tangible common stockholders’ equity	2,409,674			2,506,198			2,542,256			2,520,595			2,504,883
Net income available to common	112,245			117,657			112,501			99,448			94,473
Net income, if annualized	450,213			466,791			446,335			403,317			378,930
Reported return on avg tangible common equity	18.68		%	18.63		%	17.56		%	16.00		%	15.13		%
Adjusted net income (see reconciliation on page 19)	$	112,868		$	114,273		$	116,458		$	105,902		$	105,124
Annualized adjusted net income	452,712			453,366			462,034			429,492			421,651
Adjusted return on average tangible common equity	18.79		%	18.09		%	18.17		%	17.04		%	16.83		%

The following table shows the reconciliation of reported return on average tangible assets and adjusted return on average tangible assets³:

Average assets	$	30,994,904		$	31,036,026		$	30,925,281		$	30,742,943		$	29,666,951
Average goodwill and other intangibles	(1,757,296		)	(1,752,933		)	(1,745,339		)	(1,756,506		)	(1,780,885		)
Average tangible assets	29,237,608			29,283,093			29,179,942			28,986,437			27,886,066
Net income available to common	112,245			117,657			112,501			99,448			94,473
Net income, if annualized	450,213			466,791			446,335			403,317			378,930
Reported return on average tangible assets	1.54		%	1.59		%	1.53		%	1.39		%	1.36		%
Adjusted net income (see reconciliation on page 19)	$	112,868		$	114,273		$	116,458		$	105,902		$	105,124
Annualized adjusted net income	452,712			453,366			462,034			429,492			421,651
Adjusted return on average tangible assets	1.55		%	1.55		%	1.58		%	1.48		%	1.51		%


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 21.
	As of and for the Quarter Ended
	6/30/2018			9/30/2018			12/31/2018			3/31/2019			6/30/2019
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁴:
Net interest income	$	246,216		$	243,949		$	242,871		$	235,506		$	231,839
Non-interest income	37,868			24,145			22,475			19,597			27,058
Total revenue	284,084			268,094			265,346			255,103			258,897
Tax equivalent adjustment on securities	4,094			4,052			4,015			3,949			3,834
Net loss on sale of securities	425			56			4,886			13,184			528
Net (gain) on sale of fixed assets	(11,797		)	—			—			—			—
Net (gain) on sale of residential mtg loans	—			—			—			(8,313		)	—
Adjusted total revenue	276,806			272,202			274,247			263,923			263,259
Non-interest expense	124,928			111,773			109,921			114,992			126,940
Charge for asset write-downs, systems integration, retention and severance	(13,132		)	—			—			(3,344		)	—
Impairment related to financial centers and real estate consolidation strategy	—			—			—			—			(14,398		)
Gain on extinguishment of borrowings	—			—			172			46			—
Amortization of intangible assets	(5,865		)	(5,865		)	(5,865		)	(4,826		)	(4,785		)
Adjusted non-interest expense	105,931			105,908			104,228			106,868			107,757
Reported operating efficiency ratio	44.0		%	41.7		%	41.4		%	45.1		%	49.0		%
Adjusted operating efficiency ratio	38.3			38.9			38.0			40.5			40.9

The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share(non-GAAP)⁵:

Income before income tax expense	$	146,156		$	146,821		$	144,925		$	129,911		$	120,457
Income tax expense	31,915			27,171			30,434			28,474			23,997
Net income (GAAP)	114,241			119,650			114,491			101,437			96,460
Adjustments:
Net loss on sale of securities	425			56			4,886			13,184			528
Net (gain) on sale of fixed assets	(11,797		)	—			—			—			—
Net (gain) on sale of residential mtg loans	—			—			—			(8,313		)	—
(Gain) on extinguishment of debt	—			—			(172		)	(46		)	—
Impairment related to financial centers and real estate consolidation strategy	—			—			—			—			14,398
Charge for asset write-downs, systems integration, retention and severance	13,132			—			—			3,344			—
Amortization of non-compete agreements and acquired customer list intangible assets	295			295			295			242			200
Total pre-tax adjustments	2,055			351			5,009			8,411			15,126
Adjusted pre-tax income	148,211			147,172			149,934			138,322			135,583
Adjusted income tax expense	33,347			30,906			31,486			30,431			28,472
Adjusted net income (non-GAAP)	114,864			116,266			118,448			107,891			107,111
Preferred stock dividend	1,996			1,993			1,990			1,989			1,987
Adjusted net income available to common stockholders (non-GAAP)	$	112,868		$	114,273		$	116,458		$	105,902		$	105,124

Weighted average diluted shares	225,621,856			225,622,895			222,769,369			213,505,842			207,376,239
Reported diluted EPS (GAAP)	$	0.50		$	0.52		$	0.51		$	0.47		$	0.46
Adjusted diluted EPS (non-GAAP)	0.50			0.51			0.52			0.50			0.51


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend beginning on page 21.
	For the Six Months Ended June 30,
	2018			2019

The following table shows the reconciliation of reported net income (GAAP) and earnings per share to adjusted net income available to common stockholders (non-GAAP) and adjusted diluted earnings per share (non-GAAP)⁵:
Income before income tax expense	$	274,484		$	250,368
Income tax expense	61,371			52,471
Net income (GAAP)	213,113			197,897

Adjustments:
Net loss on sale of securities	5,846			13,712
Net (gain) on sale of fixed assets	(11,797		)	—
Net (gain) on sale or residential mortgage loans	—			(8,313		)
Impairment related to financial centers and real estate consolidation strategy	—			14,398
Charge for asset write-downs, systems integration, retention and severance	13,132			3,344
(Gain) on extinguishment of borrowings	—			(46		)
Amortization of non-compete agreements and acquired customer list intangible assets	589			441
Total pre-tax adjustments	7,770			23,536
Adjusted pre-tax income	282,254			273,904
Adjusted income tax expense	63,508			57,520
Adjusted net income (non-GAAP)	$	218,746		$	216,384
Preferred stock dividend	3,995			3,976
Adjusted net income available to common stockholders (non-GAAP)	$	214,751		$	212,408

Weighted average diluted shares	225,444,579			210,419,425
Diluted EPS as reported (GAAP)	$	0.93		$	0.92
Adjusted diluted EPS (non-GAAP)	0.95			1.01


Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)

The Company provides supplemental reporting of non-GAAP/adjusted financial measures as management believes this information is useful to investors. See legend below.
	For the Six Months Ended June 30,
	2018			2019

The following table shows the reconciliation of reported return on average tangible common equity and adjusted return on average tangible common equity²:
Average stockholders’ equity	$	4,275,097		$	4,419,703
Average preferred stock	(139,054		)	(138,245		)
Average goodwill and other intangibles	(1,744,197		)	(1,768,763		)
Average tangible common stockholders’ equity	2,391,846			2,512,695
Net income available to common stockholders	$	209,118		$	193,921
Net income available to common stockholders, if annualized	421,702			391,056
Reported return on average tangible common equity	17.63		%	15.56		%
Adjusted net income available to common stockholders (see reconciliation on page #SectionPage#)	$	214,751		$	212,408
Adjusted net income available to common stockholders, if annualized	433,061			428,337
Adjusted return on average tangible common equity	18.11		%	17.05		%
The following table shows the reconciliation of reported return on avg tangible assets and adjusted return on avg tangible assets³:
Average assets	$	30,509,306		$	30,201,974
Average goodwill and other intangibles	(1,744,197		)	(1,768,763		)
Average tangible assets	28,765,109			28,433,211
Net income available to common stockholders	209,118			193,921
Net income available to common stockholders, if annualized	421,702			391,056
Reported return on average tangible assets	1.47		%	1.38		%
Adjusted net income available to common stockholders (see reconciliation on page 20)	$	214,751		$	212,408
Adjusted net income available to common stockholders, if annualized	433,061			428,337
Adjusted return on average tangible assets	1.51		%	1.51		%
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio⁴:
Net interest income	$	480,584		$	467,345
Non-interest income	56,575			46,655
Total revenues	537,159			514,000
Tax equivalent adjustment on securities	8,165			7,781
Net loss on sale of securities	5,846			13,712
Net loss (gain) on sale of fixed assets	(11,797		)	—
(Gain) on extinguishment of debt	—			(8,313		)
Adjusted total net revenue	539,373			527,180
Non-interest expense	236,675			241,932
Charge for asset write-downs, retention and severance	(13,132		)	(3,344		)
Impairment related to financial centers and real estate consolidation strategy	—			(14,398		)
Gain on extinguishment of borrowings	—			46
Amortization of intangible assets	(11,917		)	(9,611		)
Adjusted non-interest expense	$	211,626		$	214,625
Reported operating efficiency ratio	44.1		%	47.1		%
Adjusted operating efficiency ratio	39.2		%	40.7		%

The non-GAAP/as adjusted measures presented above are used by our management and the Company’s Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans. These non-GAAP/adjusted financial measures complement our GAAP reporting and are presented above to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. When non-GAAP/adjusted measures are impacted by income tax expense, we present the pre-tax amount for the income and expense items that result in the non-GAAP adjustments and present the income tax expense impact at the effective tax rate in effect for the period presented.

¹ Stockholders’ equity as a percentage of total assets, book value per common share, tangible common equity as a percentage of tangible assets and tangible book common value per share provides information to help assess our capital position and financial strength. We believe tangible book measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

² Reported return on average tangible common equity and adjusted return on average tangible common equity measures provide information to evaluate the use of our tangible common equity.

³ Reported return on average tangible assets and adjusted return on average tangible assets measures provide information to help assess our profitability.

⁴ The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

⁵ Adjusted net income available to common stockholders and adjusted diluted earnings per share present a summary of our earnings, which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.


	STERLING BANCORP CONTACT:
	Luis Massiani, SEVP & Chief Financial Officer
	845.369.8040
	http://www.sterlingbancorp.com

Sterling Bancorp announces results for the second quarter of 2019 with diluted earnings per share available to common stockholders of $0.46 (as reported) and $0.51 (as adjusted); results reflect the continued progress in balance sheet transition and financial center consolidation strategies